Invacare 2011 Annual Report Download - page 111

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INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Fair Values of Financial Instruments—Continued
The following table provides a summary of the company’s assets and liabilities that are measured on a
recurring basis (in thousands).
Basis for Fair Value Measurements at Reporting Date
Quoted Prices
in Active
Markets
for Identical
Assets /
(Liabilities)
Significant
Other
Observable
Inputs
Significant
Other
Unobservable
Inputs
Total Level I Level II Level III
December 31, 2011:
Forward Exchange Contracts—net ................. $1,180 — $1,180 —
Interest Rate Swap Agreements—net ............... (370) (370)
December 31, 2010:
Forward Exchange Contracts—net ................. $ 955 — $ 955 —
Forward Contracts: The company operates internationally and as a result is exposed to foreign currency
fluctuations. Specifically, the exposure includes intercompany loans and third party sales or payments. In an
attempt to reduce this exposure, foreign currency forward contracts are utilized and accounted for as hedging
instruments. The forward contracts are used to hedge the following currencies: AUD, CAD, CHF, CNY, DKK,
EUR, GBP, MXP, NOK, NZD, SEK and USD. The company does not use derivative financial instruments for
speculative purposes. Fair values for the company’s foreign exchange forward contracts are based on quoted
market prices for contracts with similar maturities.
The gains and losses that result from the majority of the forward contracts are deferred and recognized when
the offsetting gains and losses for the identified transactions are recognized. The company recognized a net loss
of $250,000 in 2011, a net gain of $2,803,000 in 2010 and a net loss of $339,000 in 2009 on ASC 815 designated
derivatives. Gains or losses recognized as the result of the settlement of forward contracts are recognized in cost
of products sold for hedges of inventory transactions, sales for hedges of forecasted sales or selling, general and
administrative expenses for other hedged transactions. The company’s forward contracts are included in Other
Current Assets or Accrued Expenses in the Consolidated Balance Sheets.
The carrying amounts and fair values of the company’s financial instruments at December 31, 2011 and
2010 are as follows (in thousands):
2011 2010
Carrying
Value Fair Value
Carrying
Value Fair Value
Cash and cash equivalents ................................. $ 34,924 $ 34,924 $ 48,462 $ 48,462
Other investments ....................................... 1,362 1,362 1,588 1,588
Installment receivables, net of reserves ....................... 7,477 7,477 5,672 5,672
Long-term debt (including current maturities of long-term debt) . . . (265,484) (264,112) (246,064) (264,382)
Forward contracts in Other Current Assets .................... 1,685 1,685 2,884 2,884
Forward contracts in Accrued Expenses ...................... (505) (505) (1,929) (1,929)
Interest Rate Swap Agreements in Other Current Assets ......... 18 18 — —
Interest Rate Swap Agreements in Accrued Expenses ........... (388) (388) — —
The company, in estimating its fair value disclosures for financial instruments, used the following methods
and assumptions:
Cash, cash equivalents: The carrying amount reported in the balance sheet for cash, cash equivalents equals
its fair value.
FS-39